AtlantiCare and Pa. health system Geisinger pursue affiliation

AtlantiCare, a major South Jersey health system, has taken the first step toward joining Pennsylvania-based Geisinger Health System.

David P. Tilton, chief executive of AtlantiCare, which operates a medical center and delivers care in nearly 70 locations, said the two organizations have signed a letter of intent to work out the details of an affiliation which he said would require state approval.

"This really creates a framework under which we will move forward for the next 120 days, get to know each other a little better, but also to map out an integration plan, a transformation plan - work that we will do the moment that the regulators authorize us to move forward together," he said.

Geisinger provides both medical care and health plans and is a pioneer in an emerging trend that marries clinical services with health insurance. As a physician-led integrated health care organization based in Danville, Penn., Geisinger serves 2.6 million members of a rural population in central and northeastern Pennsylvania and has 1,000 physicians, seven hospitals, and a health plan with 448,000 members.

Tilton said Geisinger would not purchase AtlantiCare outright.

He said AtlantiCare began looking for a health system partner about a year ago.

"We didn't go out asking for money," he said. "We went out asking for capabilities and competencies that could enhance the work that we're doing already."

Tilton said the letter of intent provides for investments by both organizations and envisions "the continued development of AtlantiCare in things like technology, care delivery innovation and growing our services," he said. "The focus is on continuing to develop AtlantiCare and enhance what we're doing."

Joel Cantor, director of the Center for State Health Policy at Rutgers, applauded the moved.

"Geisinger has a very strong reputation for achieving good outcomes with lower costs compared to other health systems," he said. "New Jersey stands to benefit if an affiliation could bring their cost effective care strategies here."

Unlike Geisinger, AtlantiCare does not sell health plans to the public, but it does self-insure the health care of its employees and their families. AtlantiCare launched an accountable care organization several years ago to focus on improving the health of that population while reining in the cost of their care.

"(The success of the ACO) has really given us the inspiration and the courage to move forward," Tilton said. "We've done some outstanding work with our own employees. We have about 5,500 employees and their families that we insure, and last year we were able to actually reduce the total spend on our employees by 3.8 percent."

He said previously costs were increasing, year after year, by percentages in the high single-digits.

"We're expanding into other self-insured plans," he said. "We will very soon be expanding the number of lives that we manage through that ACO even further."

Tilton said AtlantiCare's success with its own employee group "is a 'proof of concept' that says the work that we're doing can actually produce results for others. So we're now taking that out to the market and talking to other large companies about how we can help them reduce their total cost of care as well."

Tilton said he expects the affiliation with Geisinger will be consummated.

"We are incredibly excited about this," he said. "It has great potential to really drive us into the future and we're going to put our shoulder to the wheel and do our best to work together with Geisinger to make this happen."

Tilton had nothing but praise for Geisinger.

"(It) is a national leader in this area of population health management and they have done a lot of great work, particularly in IT systems and engaging physicians," he said.

Annette Catino, chief executive of QualCare, which manages self-insured health plans and has a network of providers, said the partnership is a way of the future.

"Health care really is going through a very dynamic period — going from a situation where the providers and payers have dominated the health care system to one where the patients are going to be at the center of everything that we do," she said. "So lots of organizations are coming together — hospitals and hospitals, payers and hospitals — and they are all coming together to try to connect resources and to leverage capital to make investments so they can be more efficient."

Mark Manigan, a health care attorney with Brach Eichler, said, "(In Pennsylvania), Geisinger has a robust provider-sponsored health plan, which is the direction many systems in New Jersey are heading," he said. "In fact, much of the consolidation we are witnessing in the market appears to be in pursuit of this plan."

David Knowlton, president of the New Jersey Health Care Quality Institute, said an affiliation with Geisinger could enable AtlantiCare to operate in some respects like an insurance company that takes risk.

"It may be that Geisinger is trying to get entry into New Jersey and AtlantiCare is trying to get a relationship with an entity that allows them to take risk," he said.

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Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.